Where is trade discounts recorded in?

Trade discounts are not entered in the accounting records. They are not considered to be a part of the sale because the exchange agreement was based on the reduced price.

NB: Remember the general rule that sales are recorded when an exchange takes place. The measurement of the sale is based on the exchange price. Therefore, the amount recorded as a sale is the invoice price. The entries previously shown for a $4,000 sale would also be appropriate if the list price was $5,000, subject to a 20% trade discount.